Micron Sales Forecast Tops Estimates on Insatiable Memory Demand

**SPEAKER_1** (0:02)
Bloomberg Audio Studios, podcasts, radio, news.

**SPEAKER_2** (0:08)
This is Bloomberg Businessweek Daily, reporting from the magazine that helps global leaders stay ahead, with insight on the people, companies, and trends shaping today's complex economy, plus global business, finance, and tech news as it happens. The Bloomberg Businessweek Daily podcast, with Carol Massar and Tim Stenovec on Bloomberg Radio.

**Jake Silverman** (0:32)
All right.

**Carol Massar** (0:32)
Safe to say we've got a new top story, Micron Technology, that company out with their numbers just moments ago, stock continuing to trade higher here in the aftermarket, pretty much near its best levels here after the trade of the regular session. Tim, right now, up about eight and a half percent almost.

**Jake Silverman** (0:50)
Yeah.

**Tim Stenovec** (0:50)
It's the largest US maker of computer memory chips. The sales forecast topped Wall Street estimates, and AI fueled shortages of the components sent prices soaring in terms of numbers here. Why we're seeing shares in the after hours higher by about eight percent. 50 billion in the fiscal fourth quarter, that runs through August. Analysts estimated $43.2 billion.
Remember, this is all about the AI spending spree from data center operators. There were questions about what this would look like after some of the volatility that we saw especially in Korea with Samsung and SK Hynix. But it looks like at least for now, at least in the short term, investors' questions have been answered. But let's wait for the call.

**Carol Massar** (1:28)
It's interesting. Western Digital now up about five and a half percent. I looked at NVIDIA, it's just up about seven tenths of a percent. But you are seeing certainly some reaction in some other names in this space. Let's get to it with our team. Lucky for us with us, Ed Ludlow, the host of Bloomberg Tech. He's out there in our San Francisco Bureau right here. In our Bloomberg Interactive Brokers Studio is Jake Silverman of Bloomberg Intelligence. Ed, I'm going to toss it first out to you. It looks like a killer report.
What jumps out for you?

**Ed Ludlow** (1:55)
Yeah, I think it's just the monster outlook for the current period, fiscal fourth quarter.
It's so interesting to see the rising tides of the rest of the memory and storage market, and you're right to refer to what happened in Korea. But there is a big distinction in what's happening, which is it's very high HBM focused. It's very much the cloud business, which basically is the traditional hyperscalers and AI infrastructure players, and also the core data center business, which is much more sort of like uniform CPU based server. The demand is very broad based, and beyond that, I think Tim did a really good job to point out the 86% margin. Historically and this is where Jake's going to come back, so I think he agrees with me, but historically, the memory makers have struggled to maintain margins, or at least continue to expand margins infinitely in cycles. 86% is like software margins, right? And they have pricing power right now. All of that is so evident from the numbers.

**Tim Stenovec** (2:55)
I was just going to say that, Ed. I mean, you don't think about this in the memory space, margins, like sustainable margins at more than 85%. Jake, come on in here.
How sustainable are margins of 86%?

**Jake Silverman** (3:07)
Yeah, I pretty much agree with Ed. I mean, if you look past prior cycles, margins peaked around 60 or so percent. I mean, I think it just emphasizes the level of demand that we're seeing, some structural differences in the market. How sustainable is it?
You know, look, are we going to see softer margins for next couple of years? I don't know. I think that's probably the biggest question.

**Tim Stenovec** (3:31)
That's more of a question about the cycle than it is about Micron's product.

**Jake Silverman** (3:34)
Yeah, it's more of a question about the cycle because it's the sustainability of the pricing model because if pricing declines even a little bit, that's going to immediately hit gross markets.

**Tim Stenovec** (3:41)
Jake, what does it offer that SK Hynix or Samsung don't necessarily offer? What is its niche?

**Jake Silverman** (3:49)
I mean, I think generally speaking, Micron has talked about having lower power in their HBM, their high bandwidth memory, but the thing is, it's very difficult to determine which companies actually have structural advantages in terms of their technologies and their roadmaps. In the past, Samsung has really benefited from having more scale, more capacity in their manufacturing, so Micron has a little bit less manufacturing capacity than the other two that you mentioned.
But generally speaking, they have competitive products, and so they're able to win designs, especially in HBM, where there's just tremendous accelerating demand.